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The Worst Year for the Russian Economy

If we exclude 2009, when the Russian economy collapsed due to the global financial crisis, the current 2013 may turn out to be the worst in the entire period of the rule of Vladimir Putin in terms of economic growth.

Late last week, an international research firm Capital Economics assessed the results of the first half of the year in Russia as the start of the recession. But Russian officials still have a hope: The Ministry of Economic Development (MED) expects to rebound in the third quarter. Experts call such predictions as indecent "wishlist" or verbal manipulating of investors, who will have to believe in the future of the economic miracle.

"Russia enters in a recession," described in their study the international experts from the research firm Capital Economics the results of the first half of 2013. The data on GDP growth in the second quarter not only were worse than expected but also, according to foreign observers, correspond to the state of the economy that went down into recession.

At the end of the week Rosstat (Russian Statistics) announced preliminary estimates of economic growth. In the second quarter Russia's GDP grew by 1.2% in comparison with the second quarter of last year. That is, economic growth is slowing, as in the first quarter figure was 1.6% year-to-year. For comparison, in the second quarter of last year the economy grew at 4.3% comparing to same period of 2011.

At Capital Economics believe that the statistics of a slowdown in the second quarter of this year corresponds to decline quarter-on-quarter at 0.5%. Given that the economy shrank by 0.1% in the first quarter, it would mean that Russia is now in a

recession, defined as a decline in the economy for two consecutive quarters.

The Ministry of Economic Development expected to receive in the second quarter the GDP growth of 1.9% year-to-year but that did not happen. The Department does not waive its forecast, according to which in the third-quarter GDP growth will be accelerated to 2.5%. However, it is possible that in the near future the agency would have to revise their assessment of the 2013 outcome.

Earlier - in April - it's already lowered its forecast for economic growth in Russia from 3.6 to 2.4%. Thus, 2013 may turn out to be the worst in 14 years if we do not take into account the crisis of 2009.

Thus, the first year of Putin's presidency ended in GDP growth by 10%. In 2001, GDP has grown by only 5%. Second presidential term began with the economic growth of 7%. The crisis has turned for the collapse of the Russian economy by almost 8% in 2009. In 2010 and 2011, the increase ranged at 4.3-4.5% per year. The result of 2012 was the growth of 3.4%. Without major structural reforms it’s impossible to stop the slowdown of the Russian economy, experts say.

As noted surveyed economists, at the moment there aren’t strong signals of statistics that the deep recession has already begun in Russia. So far dynamics of the economic performance shows the rapid slowdown in growth. We can tell about the recession only when the GDP falls for two consecutive quarters. Meanwhile, economists have pointed to the indirect signs of the recession and its leading indicators.

It is possible that the recession has indeed already begun but the official statistics react to it later, and the authorities will have to recognize the onset of recession after the fact.

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